That’s as dishonest an answer to the question as Tommy Lasorda, in those vintage Ultra Slim Fast commercials, saying that the secret to out-of-control weight is spaghetti-and-meatball dinners — the daily treat, rather than the three calorie-restricted, high-fiber shakes that you choke down the rest of the day.

Marohn balances his call for downzoning with a casual mention of his previous “floating height limit” idea — allowing, across all zones, somewhat bigger buildings than the norm. This would, in essence, upzone the vast majority of metropolitan American land that’s currently zoned solely for low-rise single-family residential, while lowering allowable heights in the much smaller proportion that’s subject to more-lenient commercial zoning. (Of course, in his contrarian telling, a call for raising allowable building heights for 90% of America is titled “the case for height restrictions.”)

He pins the blame for metro Portland’s housing affordability crisis — and, by extension, the broader housing-affordability crisis afflicting bicoastal Blue America — on property speculation, saying that developers are bidding up residential land prices around transit in hopes of winning rezoning to build multifamily TOD. Thus, his call for downzoning, to frighten off those vile speculators. There certainly exist a few situations where transit-oriented speculation distorts markets — I’ve written about these pretty extensively in GGWash, pointing to why “parking craters” surround Metro stations instead of 8-story high-rises.

But these are fringe situations, affecting only a few square miles across the entire country. Even when I lived in the highly desirable, transit-accessible neighborhood of Bucktown, where zoning was infamously corrupt, the upzones that the local alderman brazenly sold did not result in the dumpy single family houses being replaced with parking-light apartments, as Chuck’s hypothesis holds. In fact, the exact opposite occurred: dumpy, parking-light apartments were replaced with swanky single-family houses! In countless other areas which have been downzoned, housing prices have increased regardless of speculation.

Why? Because the price increases in Bucktown, and on Portland’s east side or Los Angeles’ west side, have little to do with transportation (Chuck’s bailiwick) — and much more to do with rising income and wealth inequality, both within and between regions, combined with a largely static land-regulation regime that hasn’t adapted. The gains accruing to the wealthiest means that the wealthy can bid up housing prices, substantially raising housing prices in high-income regions where both demand and barriers to entry are high. As I wrote earlier, this imbalance has held on for decades in some cities, particularly in coastal California, and the political dynamic that sustains it appears to be utterly implacable.

As I also wrote earlier, the economies in different regions have diverged in a way that has fed this dynamic. Economists Stijn Van Nieuwerburgh and Pierre-Olivier Weill found that “house price dispersion” between regions increased much faster than income inequality between regions (which has alsobeen increasing): their statistical measure of the variation in house prices increased by 38 percentage points, vs. 8.6 points for wages, from 1975-2007. As their paper explains,

The increase in productivity dispersion creates flows of workers towards high-productivity metropolitan areas, driving local house prices up because of limited housing supply. Conversely, households flow out of low-productivity areas, driving local house prices down. This increases house price dispersion.

a strong case for the gap between recent changes in supply and demand exerting a strong upward pressure on house prices… the overriding importance of the imbalance between population growth and housing stock growth in explaining trends in prices…

Sure, pointing the finger at transit, multifamily, and TOD burnishes Chuck’s prickly-independent bona fides, a long tradition in Upper Midwest politics. But he’s searching only within his narrow sphere of expertise (transportation) to find the cause of problems that have much larger global causes — and which don’t lend themselves to his hyper-local bootstraps approach.

I was injured in a hit-and-run crash last year, and unlike so many others, the driver is being brought to justice. (I recently talked to a prosecutor about the case.) Here’s what I’ve learned to do: shout out the license plate number. Then repeat it, even louder. Get in the habit of doing this whenever you see bad driving, and certainly do this instead of cussing. You will need to make this so habitual that it becomes instinct — at the moment it happens, you will not be able to think clearly.

What happened to me: I was on a short summer vacation to Toronto. On a whim, I decided to take the bus to the nearby city of Hamilton, just to see something different. (Oh, it’s different, all right.) As I was crossing Main at James, with the light, I noticed a left-turning car proceeding through the intersection — clear of traffic, but not yet clear of me. I had a stomach-dropping realization of “uh, that car is going to intersect with my leg” a moment before the car’s bumper grazed my ankle.

I pivoted and began shouting out the license number repeatedly. This (a) helped me remember it when I had a chance to get to the corner and write it down, for recitation to 911, (b) alerted the driver that yes, someone had noticed, and most importantly (c) caught the attention of a witness, who was thinking clearly.

A witness who was a block away ran back towards me just afterwards, told me that the motorist had turned right, offered a description of the car complete with a correct license plate number [I was off by one], and offered to look in that direction for the car. He found the car two blocks away, parked in a parking lot, confronted the driver, and told him that he needed to return to the scene — which he did. (Like a good Canadian, this witness apologized profusely on behalf of Hamilton, and while we were waiting for the police talked about his hockey league.)

Everything else about the sequence of events was relatively easy to recall when on the phone with 911, and later when filing the police report. But without the license plate number, there’s no way that I could have even begun the process.

Here’s one goofy idea: Burning a gallon of gas produces 19.64 pounds of carbon dioxide. One could thus levy “a motor fuels tax of $0.0133 per pound of carbon dioxide emissions that result from the fuel’s combustion,” which would result in a tax of:
– $0.235/gallon for gasoline with 10% ethanol (the usual mix around here)
– $0.261/gallon for pure gasoline (usually only sold as marine fuel around here)
– $0.298/gallon for pure diesel
– $0.276/gallon for pure biodiesel
Doing so would technically put a “carbon tax” on the books without appreciably raising existing tax rates, and providing a very small incentive for biofuels.

Of course, a recalculation is also an opportunity to harmonize rates with a neighboring jurisdiction… see below.

Maryland’s current rate is equivalent to $0.335 per gallon. (Yes, that’s $0.10 higher than DC’s.) Virginia’s current rate is $0.162.

How might DC gas station owners react to an increased gas tax?

You’ll have to ask them, but I was struck by this passage in a 2011 CityPaper profile (by Christine McDonald) of Joe Mamo, who owns nearly half of DC’s gas stations:

“We are really a real estate company,” he says. “We’re in it for the real estate.” Mamo considers the coming transition inevitable, given the high cost of D.C. real estate and predictions about “peak oil,” alternative fuels, and electric cars that might eventually make gas stations obsolete. “Long term, the real estate is where the value is,” he says.

Maximize energy efficiency across all sectors, including transportation, urban design, and land use. […]

Protect our air, water, land, and communities from pollution. Promote environmentally sensitive land use and urban design to minimize sprawl, provide a healthy environment for all, and minimize resource use.

Interestingly, the strategy that calls to “Protect and restore wildlands and waterways” continues that those wildlands serve a specific, objective, quantifiable purpose: “to provide large and connected habitats.” Not to protect the favorite views of favored humans, or to protect property values for landowners, but to rescue non-human species from the threat of habitat fragmentation.

…the Sierra Club urges planning and policies which stimulate…
“Infill” residential and commercial development on unused or under-used land within city boundaries…
Preservation and revitalization of urban neighborhoods, with residents protected from unreasonable economic and physical disruption…
Attractive, compact and efficient urban areas; with densities and mixtures of uses that encourage walking and transit use, and encourage more efficient use of private autos in balance with other transportation modes…
These development patterns and transit improvements would conserve energy, water, land and building materials while enhancing the pleasure and safety of urban life and reducing travel distances.

The Transportation Policy, adopted in 1994, supports policy and systems that “encourage land uses that minimize travel requirements; strengthen local communities, towns and urban centers.”

Reduce the need to drive passenger vehicles by shortening the distance between workplace, home, shopping and school, using “smart growth” planning and improved transportation options. Provide safe and appealing options for walking, bicycling and mass transit, including light rail passenger trains, which will reduce vehicle trips, emissions, fuel consumption, and the demand for new roads and pavement. Well-designed mixed-use communities create long-term reductions in energy usage. Appropriately designed public transportation systems are an essential component of a sustainable energy society… Congestion pricing should be applied, when feasible. Parking costs should be efficiently and conveniently unbundled to give consumers and employees more control over how they choose to spend their money.

If your local Sierra Club entity is proving unnecessarily obtuse in not living up to these policies, I’d suggest engaging by appealing to the Club’s strong sense of tradition, deference to higher authorities (encoded in the “One Club” policy), broader principles, and yes, policies. One specific idea: ask them to review the “Guidelines Governing Decisions on Schools, Hospitals or Other Projects Serving Economically Disadvantaged Communities.” (Tell them “it’s on Club House, under Public Facilities.”) Those require specific steps before Club entities decide to oppose or endorse a public facility, with a specific mention of “low-income housing project” (and thus many large-scale infill developments subject to inclusionary requirements). Those steps require the Club to have a face-to-face listening session with those who will benefit, and a written assessment of the proposal and “any feasible environmentally superior alternatives” — which cannot include displacing housing to sprawling locations. Even where opposition by the Club may very well be warranted, the policy requires that it be thoughtful and considered, rather than knee-jerk.

]]>paytonTaking refugeEducation and location confound attempts to compare Asian economic statushttps://westnorth.com/2017/02/07/education-and-location-confound-attempts-to-compare-asian-economic-status/
Wed, 08 Feb 2017 00:22:01 +0000http://westnorth.com/?p=25631]]>Jeff Guo at the Post has writtenrecently questioning one “model minority” story — that the gap in income and wealth between Asian Americans and whites appears to be closing. This apparent progress would seem to contradict the power of centuries of white privilege — but only if one neglects several confounding factors.

The largest confounding factor that Guo points out is education vs. income: “But Asian Americans have to work harder just to keep up with whites. If you compare whites and Asian Americans with the same amount of schooling, Asian Americans actually make less money.” Asian Americans have, on average, more education than other Americans, and the correlation between education and income turns out to be stronger than that between race and income.

Another confounding factor is location (and urbanization) vs. wealth. For historical reasons, Asian Americans are much more likely than other Americans to live in “gateway cities,” i.e., expensive coastal metro areas. This means that Asian American homeowners are on the prosperous side of the wide-and-growing gap between gateway-city property values and property values in the rest of America. But since not all Asian American households are homeowners (especially among more recent arrivals, for whom forbiddingly high housing prices have inhibited wealth building), these benign-looking averages hide tremendous wealth inequality among Asian Americans.

Income by ethnicity and origin in metropolitan Washington; data from the Urban Institute

Wealth by ethnicity and origin in metropolitan Washington; data from the Urban Institute.

Global warming poses a grave and imminent threat to not only humanity’s future, but to our shared past as well. In a recent issue of Preservation magazine, National Trust for Historic Preservation president Stephanie Meeks wrote that “as preservationists, it is incumbent on us to reckon with climate change bravely.” If left unchecked, the higher sea levels caused by global warming threaten the very existence of countless historic structures within the District of Columbia, including a great many of the surviving structures from its earliest days. For example, the original cornerstone of the District of Columbia (at Jones Point in Alexandria) was originally constructed on dry ground — but now sits below today’s sea level, hidden by an obtrusive concrete seawall and visible only through a protective cover. From the Jefferson Memorial to Randall School, Mayfair Mansions to Tingey House, global warming could very well obliterate scores of DC landmarks.

The sad thing about my statement today? Global warming will go pretty much unchecked under the present policy regime. Points-of-no-return are rapidly approaching for the terrestrial ice sheets of Greenland and West Antarctica; even with the boom in clean energy technology, there’s no stopping sea level from rising several meters or even many meters. Ten feet, twenty feet seem matter of course now; hundreds of feet is within the realm of possibility.

Is everything that we’re fight about within our low-lying cities about to go for naught — are we just rearranging deck chairs on the Titanic?

As Ian Urbina noted in the Times in November, property sales in flood-prone coastal areas are already slowing suspiciously. It’s impossible to know exactly why, but the rising incidence and cost of even “nuisance” flooding (as extensively reported by Ryan McNeill, Deborah J. Nelson and Duff Wilson from Reuters last year might well be causing people to think twice about purchasing in flood-prone areas.

What happens when the defenses start to run out? Will land suddenly, or gradually, become worthless? One fascinating “natural” experiment to watch is in Palm Springs, where the Desert Sun’s Rosalie Murphy wrote about the consequences of the expiring land leases that underlie half of that city. Condos are going begging for buyers, since expiring land leases can’t be encumbered with fresh mortgages — but commercial development often continues apace, since the mortgage terms are shorter.

I appreciate that the Trust is thinking more intersectionally, to the point of reframing its work as “reurbanism.” But given the forecasts, it’s tough for me not to see a lot of local skirmishes over waterfront sites as pretty pointless.

]]>paytonWhere it all beganGlobalization and the truthiness sweatshopshttps://westnorth.com/2016/11/07/globalization-and-the-truthiness-sweatshops/
Mon, 07 Nov 2016 22:32:10 +0000http://westnorth.com/?p=25486]]>A few years ago, American authors like Winnie Wong and Peter Hessler stumbled across a curious phenomenon: Chinese towns that applied the mindless logic of mass production, backed by China’s unparalleled ability to conjure up entire industrial-scale supply chains from thin air, to an improbable export — schlocky oil paintings, often stroke-for-stroke knock-offs of museum treasures. These towns aren’t the colorful and carefree artists’ colonies of our imaginations (such places have largely been gentrified or touristed into oblivion); instead, they’re still dreary factory towns, complete with migrant peasants being worked to the hilt. Wong profiled the village of Dafen, one of the chengzhongcun (urban villages) embedded within the sprawl of metro Shenzhen. There are certainly fascinating original artists working within China, and zero-talent hacks passing off “art” in the West, but frankly I’m not sure what to make of mass-produced creativity.

It’s a through-the-looking-glass version of the idea that cities can structure their growth around cool “creative class” agglomeration economies that turn out stylish, disruptive innovations. Of course, that assumes that customers want tasteful products — a point Barnum disproved.

First, how large would the store be? The flagship on Chestnut Street in Center City Philadelphia has 29,000 square feet, mostly on the lower level. By comparison, the Denver Pavilions store (also opening this week) is only 17,000 square feet on two levels. Finding a space that large within downtown DC is tough, especially given that many of the office buildings there were built with office tenants, not retailers, in mind.

However, two storefront museums have or soon will vacate their spaces in tourist-rich area around Gallery Place. How do these stack up?

The more prominent location is the Spy Museum site at 800 F St NW, owned by Douglas Properties. 27,231 square feet will be available, directly opposite the Portrait Gallery and with a prime F Street address (down the street from J. Crew, Anthropologie, Zara, Ann Taylor, H&M, Banana Republic, and others), once the new spy museum opens in late 2018. However, the Spy Museum space has several strikes against it. Not only is it not possible to open a store until 2019, given construction timelines, but the interior was assembled from several rowhouses and thus has many partitions and level changes. While these are easily hid with a museum buildout, they’d result in a costly and complex renovation for a larger-format retailer who wants to keep sight lines more open. The leasing flyer seems to indicate that Douglas agrees, and would rather lease the space as four spaces ranging from 1,871 to 11,401 square feet.

Slightly less prominent, but perhaps more likely, is Terrell Place, the former Hecht’s department store at 7th and F (with Rosa Mexicano at the corner). The space vacated by the Crime Museum is now available, with up to 8,762 square feet available at street level on 7th St. What’s more important is that there’s at least 11,482 square feet available in the basement — potentially expandable to 52,751 square feet by shifting other stuff around the basement.

Which raises another possibility: there might be other office buildings in the area where vacant or underutilized basements or second floors could be added to small ground-floor spaces to yield 20,000 square feet. It used to be that landlords made all the money on offices, and only retailers selling steaks, sandwiches, sundries, or savings accounts were brought in to serve the worker bees. Now, downtown finally has the foot traffic to support real retail, and the supply is beginning to catch up.

Earlier this week, startup incubator Y Combinator made a bit of a splash by hiring a lolcat entrepreneur to work on its “New Cities” program. The entire endeavor appears to be completely ahistorical. So, in an effort to help them out, here’s a reminder of the last time someone (the federal government) splashed out a lot of money to build cities from the ground up in America.

It’s worth noting that, 40-some years later, only The Woodlands has evolved into something resembling a city, with its own economic base — but probably due to its location in metro Houston, which sustained population growth of 20%+ per decade from 1970 through 2010. Several of the others remain half-built, pleasant-enough bedroom communities, and a few of them hardly ever got off the ground.

It turns out that city-building, and especially economic development, is an iterative, incremental process that’s highly resistant to shortcuts. Yes, economic booms do happen in unexpected places, but almost all of those are associated with large institutions and relatively unskilled labor. Re-creating the intricate economic interdependence of a 21st century metropolis will prove a monumental challenge, especially in an era of subdued labor mobility.

I am Payton Chung, a regular Metrorail rider and chair of the DC Sierra Club’s smart growth committee (although I speak for myself). I use Metro both late at night as well as on weekend mornings (when the Sierra Club begins day hikes), and I oppose a permanent cut in Metrorail’s hours.

If the service-hour cuts become permanent, Metro will have more limited operating hours than any large US rail transit system, and at lower evening frequencies. Metro should learn from how other major US rail systems perform inspections and maintenance without shutting down the entire system. I lived along the Blue Line in Chicago, which is a two-track line (parts of which were built 100 years ago) that operates 24/7. When track maintenance is done (and a major renewal is underway presently), it is done by suspending service on part of the line and providing shuttle buses.

In that spirit, I understand that temporary service suspensions may be necessary from time to time. However, these suspensions must be of limited duration, must be outlined clearly in advance, must achieve specific maintenance and repair goals, and absolutely MUST be paired with adequate alternative service. The Coalition for Smarter Growth has outlined several principles along these lines.

Metro already suspended late-night service months ago without providing replacement bus service. As a result, Metro has been wasting money running nighttime buses that begin/end their routes at shuttered Metro stations like Pentagon, King Street, and Rhode Island Avenue. Regardless of WMATA’s ultimate decision regarding service hours, this farcical and inexcusable situation must end.

Thank you for the opportunity to address the region’s critical mobility needs.

]]>paytonIdle speculation: downtown Brunswick, Pierce Schoolhttps://westnorth.com/2016/10/24/idle-speculation/
https://westnorth.com/2016/10/24/idle-speculation/#commentsMon, 24 Oct 2016 19:28:59 +0000http://westnorth.com/?p=25353]]>Some people watch “House Hunters” for hours on end, and others peruse Curbed to imagine themselves inside huge mansions. Personally, I’m partial to idly imagining what could happen with those quirky old buildings that show up on the commercial listings.

1. The property: Two business-zoned buildings on the main street of Brunswick, Maryland, a commuter-rail town that’s 15 miles to Frederick or 18 miles to Leesburg. The train trip to Washington Union Station is about 90 minutes, or it’s a a good bike trip — 55 miles up the C&O towpath from Georgetown, or via the W&OD and pretty country roads from Arlington. Brunswick has an almost-intact core of historic houses and shops, perched above the Potomac River, with great views of hills and woods and a railyard (yay). It’s a railroad town that was incorporated only in 1890, so its detached frame houses have an unusually Midwestern feel. There’s free weekend parking at the MARC station, at lower left in the photo.

3-story (plus walk-out basement) main street commercial building at 102 W. Potomac St., $875,000. 14,000 square feet in a 1908 Romanesque Revival building. Includes mid-block gravel parking lot, which is beside this building and behind church.

Former New Hope United Methodist Church, 7 S. Maryland Ave., $450,000. 15,000 square feet in a 1851 building facing a side street, including a 200-seat chapel (on left, gabled roof) and a 1,300 sq ft fellowship hall (I’m guessing that’s on the right, under the flat roof).

The problem: Brunswick is cheap, but it’s just a bit too far from the metro area to draw commuters (45 minute drive to either Dulles or Rock Spring), and it’s not exciting enough to be a day-trip destination. Old churches are expensive to reconfigure and maintain, and churches can be picky sellers. The commercial building is priced well above its assessed value of $571,800. The buildings’ configuration puts 3/4 of the space at ground or basement level, which is problematic given the limited market for retail.

Suggested buyer: An inn-restaurant catering to food/wine tourism, using the McMenamin’s model. Brunswick is accessible by commuter rail and highway, and sits between the renowned and thriving wine/beer/cider industries of Frederick County and Loudoun County — which have surprisingly few non-auto-oriented lodging options for weekend tourists. (Besides some B&Bs, Leesburg has one inn.) Downtown Brunswick is sleepy, but has signs of life: there’s already a brewery a block over, a coffeeshop in an adjacent old church, a B&B two doors down the side street, and a railroad museum. The building has event spaces, a catering kitchen, enough space for about 15 rooms upstairs, and on-site space for deliveries, tour buses, etc.

An alternate plan: the Potomac Street building might pencil out as loft apartments upstairs and a production-on-premises retailer (e.g., these neighbors) in the lower floors.

2. The property: Former Pierce School, 1375 Maryland Ave NE, Washington, D.C., $7,250,000. This decommissioned public school, just a block from the Atlas Theater and H Street, achieved some notoriety when it was last on the market in 2014 [WSJ, UrbanTurf]. A multifamily developer bought the old school and converted it to 10 units — seven normal-sized loft apartments, two flats in an adjacent house, and one absurdly tricked-out, 9,500-square-foot penthouse with ceilings up to 32′ high, five bedrooms, an office, a screening room, and a roof deck.

The problem: The (correct) thinking in 2014 was that the property fell through the gap between two kinds of buyers: landlords and upper-bracket homebuyers. As the seller told UrbanTurf, “the penthouse unit, being so large, does not appeal to a traditional multi-family buyer, and the many folks that wanted the penthouse did not want to be bothered by rental units.” (As the real estate saying goes, “fall in love with your pro forma [spreadsheet], not your project.” Oops.) The asking price has gone back up, after having fallen to $6.5M, and even at the lower price DC’s rent control limits the upside.

Suggested buyer: A boarding-house, perhaps run by a national cultural institute that wants to foster international artistic ties, or a particularly wealthy commune (er, co-living arrangement). As hinted above, the RF-1 zoning doesn’t permit subdividing the penthouse into smaller units by-right; it would have to be rezoned (a contentious process) and then major construction would ensue. But since the building was a school, there are unusual uses permitted under its zoning (PDF):

Art center, incubator, or school; local serving community service use (sec 252)

Boarding house, maximum 8 residents, minimum 3 month stay (sec 301)

Nonprofit or government uses (by special exception)

The penthouse could be reconfigured as an arts incubator with six resident artists (on 3+ month rotations), with its ample entertaining rooms reconfigured as shared studio/teaching/event spaces. If the penthouse truly requires $12,500 a month (the asking rate when it was put on the market in 2015) to pencil out, it’s a much easier sell as creative office space for $16/sq ft.

Or, with modest reconfiguration, the building could make a luxe university branch campus with offices and classrooms upstairs, and dorm rooms carved from the apartments.

Would you pay $700/sq. ft. for this 2-bedroom alley house? Somebody did, paying 170% above its 2006 tax value. Sure, valuation growth like that isn’t sustainable, but what about our cities is?

You can if (1) demand grows just a bit faster than supply, or if (2) incomes are growing, or if (3) slightly more income can go towards housing — and certainly so if all three occur. Indeed, all three of these dynamics have sustained housing price inflation in gateway cities over the past generation.

This inflation has been politically possible because many existing residents (and thus voters) are sheltered from the resulting affordability crisis. Only a minority of people are exposed to housing affordability; most current residents are sheltered from price increases, having purchased or rented their housing at yesterday’s market prices. It’s pretty much only in-migrants who have to pay today’s housing prices, and since they’re migrants, they don’t vote. In-migrants are also a surprisingly small share of Americans: in any given year, fewer than 3% of Americans move across state or national borders.

1. Between job growth, smaller households, and natural growth, housing demand is increasing faster than population (and construction) in many metro areas. This has been the case in California for decades; the LAO’s 2015 paper estimates that since 1980 (my entire lifetime!), California has built 100,000 fewer units every year than it should, and yet (a) demand to live in California continues, although definitely abated; (b) prices have skyrocketed; (c) construction has added some new supply.

2. Median incomes nationally have been flat for the past generation, but incomes in the richest gateway cities have been soaring — especially at the top of the distribution, due to rising inequality. The minority of households that are exposed to high prices may very well be able to afford those prices in these cities, explain Gyourko, Mayer, and Sinai in their paper on ‘superstar cities’: “Recent movers into superstar cities are more likely to have high incomes and less likely to be poor, than recent movers into other cities… In short, residence in superstar cities and towns has become a luxury good. The cities’ increases in housing price appear to outstrip known productivity increases and the value of any additional amenities.”

Since only a small proportion of housing units trade hands each year, cities with rising incomes at the top and relatively few houses available (e.g., the “superstar cities”) see “new money” outbidding others for those few units, pulling prices up. Because house prices are based on comps, prices for other houses also rise. As Matlack and Vigdor write, “In tight housing markets, the poor do worse when the rich get richer.”

I know this seems insane, but income inequality has gotten so far out of hand that in many cities super-luxury housing is under-supplied, with tremendous consequences all the way down the housing ladder. There are over a thousand Bay Area households with million-dollar bank accounts for every single house that came on the market last year in Atherton, the choicest of Bay Area towns. Hence, house prices in Atherton have doubled in four years.*

3. Metro economies have evolved in lots of small ways to cope with higher housing prices at the margin. At first glance, “the poor will always be with us,” but in reality metro areas differ very substantially in terms of their economic makeup. Having moved from low-cost Chicago to high-cost DC, I’ve noticed that this slowly-accumulating, giant gift to high-cost-regions’ landlords has been cobbled together by squeezing a few dollars here and there from other sectors:
– Higher labor costs: the minimum wage here is about 15% higher, and high-labor-input services (like haircuts) cost substantially more here, because the staff earn more.
– A shift towards higher-wage work and reduced labor inputs (see #2 above). There are, of course, lots of well-paid jobs in DC; nearly half of households here earn over $100K. Many dual-income “power couples” who have no problem with the local cost of living. But there are surprisingly few on-site support staff for them, and instead there’s often off-site help. Even in labor-intensive industries like restaurants, on-site prep work can be minimized by relying on commissaries and distributors based in cheaper cities. (You can forget about Jacobsean “import substitution.”) Anecdotally, I’ve heard that employers are willing to make do with thinner staffing here than elsewhere.
– People work more; DC’s female labor force participation rate is 15% higher than Chicago’s.
– Housing itself can’t be substituted (everyone needs somewhere to live), but houses can be. People downgrade their locations or living standards, living in smaller or lower-quality housing units in less desirable neighborhoods than they otherwise would. They also “pay” for housing with long commutes, often from what are technically other metro areas.
– People borrow more. DC has more mortgages and higher student-loan bills than any other metro.
– People spend more on housing, and less on other goods and services. Brookings’ Natalie Holmes notes that the 20th-percentile unit in DC costs 48% of a 20th-percentile income, vs. 38% for a 20th-percentile individual in Denver.

Citizens are spending money on accommodation that they would readily divert to goods and services if their housing costs were lower… the money ‘trapped’ in the housing market runs to billions… Unleashing this spending would in turn boost business revenues and create more jobs. Assuming that businesses were to channel all additional revenue into employment, we estimate that Beijing could generate more than 400,000 new jobs, Mexico City more than 200,000, São Paulo more than 143,000, and Hong Kong nearly 148,000.

* Chuck’s follow-up post posits that property owners are speculating on upzoning. This line of reasoning is beloved by so-called “SF progressives,” who relish pinning the blame for everything upon evil, greedy developers and the obnoxious “kids these days” who inevitably fill their apartments. Yet this densification/speculation theory cannot explain the skyrocketing housing prices that are at the very epicenter of America’s metro affordable housing crisis — in places that have zero multifamily growth and zero transit investment, but LOTS of high-wage jobs, like Atherton, Menlo Park, and Palo Alto in Silicon Valley, or Chevy Chase in Maryland, or the Hamptons. Atherton is the most extreme example: the town banned all multifamily housing and sued to stop transit, and yet house prices have doubled in four years.

Perhaps, instead of transit-oriented speculation, exclusionary, single-family-only snob zoning has left supply and demand imbalanced. Believe it or not, the demand for $3M houses in Atherton vastly exceeds the supply of $3M houses, so the $3M houses have been bid up to become $6M houses. I know this seems insane, but there are over a thousand Bay Area households with million-dollar bank accounts for every single Atherton house that came on the market last year.

There are also many fashionable urban neighborhoods where housing prices have spiraled even while housing unit density is declining: the demand for mansions is so high that humble apartment buildings get demolished for glamorous single-family houses. (Once again, life imitates the Onion.) This was even the case in my onetime home of Bucktown in Chicago, where the ward boss infamously handed out spot rezonings upon “request”; in theory, these could have been used to add units, but in practice the McMansions just got fatter.